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Glossary

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Administration of investment contributions of the company

This institute allows overtaking deposits for the company prior to its incorporation

The administrator of deposits is:

  • one of the founders (mentioned in the founding document)
  • or bank (only cash deposits, under contract from the bank)

Administrator's duties:

  • require the transfer of deposits that must be paid before the incorporation of the company
  • proper governance
  • provide a written declaration of repayment of deposits by shareholders for the purpose of registration in Commercial Register
  • transfer investment contributions

Board of Directors of OJSC

Managing authority of executive and administrative nature (therefore sometimes referred to as "the Board").

The authority that decides on all matters except for matters reserved for the General Meeting or Supervisory Board.

The Board of Directors consists of:

  • Business management - management of the company in economic, industrial and organizational terms
  • Secretary/agent - makes legal acts on behalf of OJSC externally (articles, General Meeting or Supervisory Board may restrict it, limit, however, is not effective outside), each member of the Board of Directors acts separately on behalf of the company, unless the statutes provide otherwise.

Board of Directors manages the company between sessions of the General Meeting, it is a collective body (at least 3 members, from their elected chairman; does not apply to one-member JSC) and elected (by General Meeting or Supervisory Board, for the maximum term of 5 years - assessed for each member of the Board of Directors separately, repeatability possible) , its members may be appealed ny the body that elected them, they can withdraw (§ 66/1 col. law).

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Business (entrepreneurial activities)

Systematic activities carried out by an entrepreneur independently, in his own name and on his own responsibility for profit.

Independence
The entrepreneur himself makes business decisions, is not subject to command of anyone else, is in no relationship of subordination, is not personally subordinate to his trading partners (in many business professions certain dependence on the instructions of the customer is evident); independence, however, does not remove the obligation to follow the law and the liabilities assumed; the results of his activities are carried out by contract, i.e. by selling products, providing services, etc. The business should be distinguished from the work under an employment relationship where the employee performs work within the employer's organization, according to his disposition, usually in his premises and through his production and labour resources

Consistency
for example, may be a seasonal activity, activity with certain breaks or special occasions - but it must not be unique activity, performed only rarely and randomly - a prerequisite for consistency is repetition of individual actions.

Carry out in his own  name 
excludes such action by companions on behalf of shareholders or employees activities on behalf of the employer, includes activity based on the contract of mandate (commercial lawyers, lawyers)

On his own  responsibility
anyone else in not responsible for the entrepreneur, he is responsible for his liabilities, if he commits a breach of a legal obligation, he bears responsibility associated with such a violation; that is not the case, if an employee commits a breach of a legal obligation when performing tasks of his employer - responsibility to a third party arises the employer and the employee is responsible to that employer, the infringement is therefore attributed to his employer - entrepreneur

For profit
an entrepreneur tries to get material benefit, profit is the motive of business; fact that this effort has not been satisfied yet does not change the fact that this is a business, the same applies to loss of earnings; law admits, in some cases, an entrepreneur and companies, which became not established for business purposes, in practice, it raises the question whether this benefit must have a pecuniary nature

A business is defined so that it is an activity performed by an entrepreneur - it must be an activity performed by a person under the list referred to in § 2, second paragraph, this list, however, is to some extent dependent on whether these people actually do business, and from that point of view, the provisions of § 2 of the Commercial Code is a circular definition: An entrepreneur is one who undertakes, but business is activity done by entrepreneur."

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Business share

Business share is participation of a partner in a company and the resulting rights and duties.

Share in the business always has two sides:

  1. Quantitative page -partner's share, can be defined in general
  2. Qualitative - rights and duties associated with the share, different for each company
  • Property rights
  • right to share in profits
  • the right to settle the shareholder and the company
  • Non-material rights
  • right to participate in the control and management of the company
  • right to information on matters of the company
  • Equity obligations
  • deposit obligation
  • obligation to compensate for loss of the company
  • Non equity obligations
  • to refrain from competitive behaviour
  • other obligations - are usually based by social contract and under the specific circumstances of that company"
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Cancellation and termination of the company

Forms of company cancellation

1) Without liquidation

  • the wealth goes to legal successor company transformation) - 52
  • when submitting a petition for bankruptcy where:
  • proposal rejected for lack of property,
  • cancellation of bankruptcy following the completion of the resolutions
  • cancellation of bankruptcy where the assets of the bankrupt is insufficient to cover bankruptcy costs; provided that the company has no property (except for matters excluded from the merits); the approval of the tax authority is not required for the deletion of the SO;

2) With liquidation - the company is abolished already at the moment of entering the liquidation."

Ways to cancel

Voluntary - by agreement of all shareholders or by the decision of the body of the company (dissociation decision) - these may cancel their decision until the liquidation balance has been started (the date of effect of such decision the role of the liquidator ends; the company has to prepare interim financial statements)

Forced - by decision of the court (on a proposal of the body or person with a first interest, regional courts)

  • inactivity - no general meeting has been held in the past 2 years, or no statutory bodies of the company whose terms of office ended more than one year ago have been elected in the last year, or the company does not carry out activities for more than two years
  • loss of business authorization
  • the disappearance of the prerequisites required by the law for the company establishment or the company cannot be perform business for insurmountable conflicts between shareholders
  • violation of the obligation to create RF
  • violation of the obligation to pursue business activity through the natural persons specially authorized
  • breach of the obligation to sell part of the business or to divide it imposed by the competition authority
  • bankruptcy - see here above (if a bankruptcy petition is rejected for a reason other than for lack of property, the company is not cancelled, if the bankruptcy is determined, the liquidation will be carried out)
  • the court shall set a time limit for the removal of the ground of revocation if removal is possible

The company is cancelled as of the date of the deletion from the Commercial Register (similar to its origin - registration in the OR).

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Commercial Register

Commercial Register is a public list which shall contain the information concerning the entrepreneurs or organizational units of their companies for which it provides law. Commercial Register is kept by a court appointed by a special law (registration court). Commercial Register is a public list of entrepreneurs (but not all) and of basic and legally relevant data about them (the data that are important for flexible and secure business transactions).

The main function of Commercial Register is to provide  basic information on business partners in business.

Company foundation

It is a process leading to the founding of a trading company, usually a limited liability company or a joint stock company, but also other forms of company are established in certain cases. Founding a company in the Czech Republic is considered a very time-consuming and administratively demanding process and therefore more and more clients are using specialized advisory firms or law firms for this purpose.

Company registered office

Company registered office is the address that is registered as a seat in the Commercial Register or other legal records. The entrepreneur is obliged to state to the Commercial Register, a priori, his actual place of business. The seat of the organizational unit of the enterprise is the address of its location. Registered office is of fundamental importance in terms of the nationality of a legal person. It determines the law applicable to that person, juridical and defines who will give it diplomatic protection. The four criteria are distinguished - the seat, the state constitution, state of business, nationality of partners (directors).

Concern - holding-type group

Concern arises as a grouping of formally autonomous entities, some of which are in spite of their legal personality subordinate to another subject so that the group acts as a centralized entity comprising a single organization and unity of management.

Concern is defined by Commercial Code § 66a, paragraph 7: a group consists of a single business group of at least two persons, one of which is against the other person in controlling position. A concern may arise based on the simple fact of the existence of a controlling and controlled entities (rebuttable presumption) - then we are talking about a de facto concern. The group may be constituted on the basis of the controlling agreement - then we are talking about contracting concern.

Defining element of concern is the merger of several legally autonomous persons to the system allowing common management. Individual group companies are managed in the interests of the whole, which may not lead to the simultaneous benefits of each of the group companies.

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Concerted practices

The term of concerted practices is regulated by the provisions of § 66b of the Commercial Code. Acting in concert is acting of independent persons made in mutual understanding to acquire, assign or exercise voting rights on particular person for the purpose of enforcing a common influence on its management, running a business, occupation statutory or supervisory body or else influence the behaviour of such a person. Those who act in concert are obliged to fulfil the obligations arising therefrom jointly and severally.

Concerted practices must be active, it may not be concluded a special agreement and must follow the legally relevant target. Not every action is automatically acting in concert.

Acting in concert is thus a deliberate alignment that may not be permanent. The law does not define exactly acting in concert, but establishes a rebuttable presumption.

  • persons who have a relationship with the company, i.e. legal person and its statutory authority, persons in their direct control scope, a member of the supervisory board, liquidator, bankruptcy, arrangement or forced administrator
  • controlling and controlled entities
  • persons controlled by the same person
  • entities constituting the Group
  • Ltd. and its partners, public trade company and its partners, limited partnership and general partners. These partners act as persons in concert
  • relatives - as Civil Code defines in § 116
  • investment company and its investment fund or pension fund

The burden of proof that the persons mentioned above are not acting in concert carries any person who testifies presumption.

Concerted practices have, according to the Commercial Code, inter alia, the following legal consequences:

  • constitutes control of the company, if the persons acting in concert have votes enough to promote decisive influence over the management and operation of the enterprise,
  • excludes the right to claim damages for non-payment of the harm that was caused by the implementation of the instruction of the controlling entity if all shareholders were acting in concert,
  • excludes the exercise of voting rights at the AGM in cases provided by law (when deciding whether to him or another person acting in concert to be excused duty or whether he or person acting in concert to be removed from office for the infringement) unless all shareholders are acting in concert,
  • constitutes an obligation to make a takeover bid for control of the company with registered participating securities except for exceptions set by law
  • constitutes reporting duty of voting rights
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